MNE competence‐creating subsidiary mandates

The determinants of R&D intensity differ between subsidiaries in a multinational enterprise (MNE). Previous literature suggests that whether a subsidiary achieves a competence‐creating output mandate depends on the qualities of its location. R&D strategies in competence‐creating subsidiaries are supply‐driven while those in purely competence‐exploiting subsidiaries are demand‐driven. Using data on U.K. subsidiaries of non‐U.K. MNEs, we find that the level of subsidiary R&D depends on MNE group‐level and subsidiary‐level characteristics as well as locational factors. The R&D of mandated subsidiaries rises with acquisition, but for non‐mandated subsidiaries R&D falls upon acquisition. MNEs that grow through acquisition have more inter‐subsidiary R&D diversity. Copyright © 2005 John Wiley & Sons, Ltd.     

Regional headquarters in China: Role in MNE knowledge transfer

To improve control and coordination with operations in distant locations, multinational enterprises (MNEs) establish regional headquarters (RHQs). The number of RHQs in Shanghai registered with the Shanghai Municipal Commission of Commerce has increased from 154 in 2006 to more than 400 in 2012. Managing knowledge constitutes one of the major strategic advantages of an MNE, but little is known about RHQs and their role in MNE knowledge flows. Based on interviews with regional, subsidiary, and global managers, we explore knowledge flows involving the RHQ. Our data suggest that RHQs can have a role in inflows and outflows of knowledge, and that this involvement is influenced by RHQ management, structure, and position within the subsidiary network.     

The impact of trust and local learning on the innovative performance of MNE subsidiaries in China

We investigate innovative performance of subsidiaries in multinational enterprises (MNEs) in China from an external local embeddedness perspective. We draw from prior research on subsidiary embeddedness and use social exchange theory (SET) to develop hypotheses relating to how trust with local partners and learning from local partners will impact innovative performance of MNE subsidiaries in China. Given the nature of the Chinese context, we argue that innovative performance will be positively influenced by trusting relationships with local external partners regardless of the location of the subsidiary in China. On the other hand, we argue that the role that learning from local partners plays on subsidiary innovative performance is location-specific, being dependent on the degree to which the location supports an innovative, knowledge economy. In addition, we hypothesize a location-specific interaction effect between trust and local learning. Using data from a survey of 306 MNE subsidiary managers in three tier-1 locations in China (Beijing, Shanghai, and Guangzhou) we find strong support for our hypotheses, and identify the strongest interaction effect between trust and local learning in Beijing.     

The advantage of foreignness in innovation

I argue that subsidiaries of foreign multinational enterprises (MNEs) enjoy an advantage of foreignness in innovation, that is, they are more innovative than domestic firms. To explain this, I present the subsidy and the incentive arguments. The subsidy argument proposes that subsidiaries are subsidized in their innovation effort by the MNE, which results in subsidiaries having more innovations than domestic firms, because they belong to a foreign MNE. The incentive argument posits that subsidiaries are subject to two sets of unique and converging pressures, one at the MNE level in the corporate factor market and another at the host country level in the consumer market. These pressures drive subsidiaries to become more successful at transforming their research and development investments into innovations. Copyright © 2011 John Wiley & Sons, Ltd.     

Subsidiary-specific advantages in multinational enterprises

This paper discusses the internal patterns of competence building in the multinational enterprise (MNE), with a focus on the creation of capabilities in its foreign subsidiaries. We present a new framework to synthesize 10 types of MNE–subsidiary linkages leading to capability development. We find that several of the 10 capability development processes are associated with subsidiary-specific advantages. We discuss the process of subsidiary-specific advantage development within the organizational structure of the MNE when it is a differentiated network of dispersed operations. Copyright © 2001 John Wiley & Sons, Ltd.     

R&D networks and innovation: decentralised product development in multinational enterprises

This paper documents the ways in which overseas R&D in MNEs now plays roles in what are innovative new approaches to innovation itself. Networks of laboratories are seen as supporting both the short-term and long-term competitive evolution of the MNE group's globally-effective product innovation.
In terms of the immediate commercial application of new products for global markets it is argued that product development labs work within creative overseas subsidiaries in MNEs. These aim to derive variants of the new product that fully meet the distinctive needs of each key regional market.
Another separate network of decentralised MNE labs carry out precompetitive (basic or applied) research, embodying particular areas of technological comparative advantage of their host countries. This network of labs therefore provides inputs into a centrally-articulated programme whose objective is to provide the basis of the longer-term technological evolution of the MNE, by upgrading the core knowledge from which future generations of innovative products can emerge.     

Toward a Geocentric Theory of Multinational Evolution: The Implications from the Asian MNEs as Latecomers

Despite their growing proliferation and importance, the multinational enterprises (MNEs) from the developing countries have not received adequate attention. Further, there is a growing concern with the validity of the extant MNE theories in the context of globalization and network. This paper seeks to address two questions: (1) how much can we apply the extant MNE theories (which are built on the evidence from the developed countries) to the MNEs from the developing countries as latecomers; and (2) how much can the evidence of the MNEs from the developing countries as latecomers offer to modify and enhance the extant MNE theories. The evidence of one longitudinal embedded case study shows that the extant MNE theories need modifications (so as to apply to the MNEs from the developing countries as latecomers) and enhancements (so as to better explain all MNEs). Also discussed are the significant implications for further theory building with regard to MNEs in the context of globalization and network.     

Caught in the crossfire: Dimensions of vulnerability and foreign multinationals' exit from war‐afflicted countries

Research summary : When war occurs in a country, some foreign multinational enterprises (MNEs) stay on, while others flee. We argue that MNE responses to external threats depend on the firm's vulnerability, which we decompose into exposure (proximity to threat), at‐risk resources (potential for loss), and resilience (capacity for coping). We test the independent and interactive effects of these dimensions using a geo‐referenced sample of 1,162 MNE subsidiaries in 20 war‐afflicted countries between 1987 and 2006. We find that highly valuable resources can become liabilities when exposed to harm, and the best way to cope with external threats may be to exit. Our findings extend the resource‐based view and real options theory by demonstrating the bounded value of resources and options in the face of environmental contingencies. Managerial summary : A recent survey of multinational enterprise (MNE) executives revealed that 30 percent of the respondents believed that their firms were exposed to collateral damage from war, with more than 90 percent expecting risks to rise. Yet, 25 percent of the executives indicated that their firms had no continuity plan. Our study of MNEs in war‐afflicted countries highlights the costs of not having a response strategy in place. We find that, in war zones, otherwise highly valuable locations and resources can become sources of vulnerability that prompt early withdrawal from a host country. Our work further highlights the value of real options thinking—where structural solutions such as building redundancy into a portfolio of options may exist in advance of problems—for navigating hostile environments. Copyright © 2016 John Wiley & Sons, Ltd.     

International Framework Agreements: A New Model for Securing Workers Rights?

A rapidly growing number of international unions are signing international framework agreements with multinational enterprises (MNEs), securing their commitment to respect fundamental workers' rights. This article explores the agreement between the global banana giant Chiquita and the Latin-American Coordination of Banana Workers Unions (COLSIBA) signed in 2001. The study shows how the banana unions employed innovative tactics of regional coordination and of alliances with nongovernmental organizations in the major consumer markets. Fieldwork on the implementation of the agreement further reveals an overall poor use of the agreement potential but also how the agreement was used as leverage for local organizing activities. This article argues that such international agreements show a promising way to defend and advance workers rights within MNEs, creating space for union organizing, collective bargaining, and social dialogue.     

The effect of alliance network diversity on multinational enterprise performance

This paper examines the impact of alliance network diversity on multinational enterprise (MNE) economic performance. We consider competing hypotheses derived, alternatively, from transaction cost theory and network theory. Using a latent variable structural equation modeling approach on a sample of 580 large MNEs, we find that MNEs with more diverse alliance networks experience lower economic performance on average than those with less diverse alliance networks. Copyright © 2005 John Wiley & Sons, Ltd.     

Home-country institutions and corporate social responsibility of emerging economy multinational enterprises: The belt and road initiative as an example

This paper examines the impact of home country institutions on corporate social responsibility (CSR) of multinational enterprises from emerging markets (EM-MNEs). Taking the Belt and Road Initiative (BRI) as an example and using a sample with 2052 firm-year observations from China over the period 2008–2018, we find that the BRI exerts a positive and significant effect on overall CSR of Chinese MNEs involved in the BRI and the positive effect is stronger for Chinese state-owned MNEs. In addition, only two dimensions of CSR (Employee Relations and Products) are improved significantly under the pressure of BRI. Finally, we examine the interactive effect of home- and host- country institutions on Chinese MNEs’ CSR and find the positive impact of the BRI on MNEs’ CSR performance is stronger in host countries with a higher level of CSR related institutional pressure. These results provide practical suggestions for the Chinese government and MNEs to further improve CSR under the BRI, and enrich our understanding of the interactive effect between home- and host-country institutions on enhancing Chinese MNEs’ reputation and promoting regional cooperation with countries along the BRI.

     

Global Innovation in MNCs: The Effects of Subsidiary Self‐Determination and Teamwork*

The ability of multinational corporations (MNCs) to leverage their innovation competencies across globally dispersed subsidiaries is an increasingly valuable source of competitive advantage. As multinational enterprises turn to foreign subsidiaries for research and development (R&D) and product development, questions arise regarding the most effective organizational structures for global innovation. Although organizational conditions that satisfy the needs for self‐determination and teamwork have long been considered intrinsic motivators, past research has not analyzed the consequences of intrinsic motivators on global innovation. The basic research question is this: In globally dispersed subsidiary R&D units, what organizational conditions and motivators are associated with the highest knowledge output? A sample of 275 globally dispersed R&D subsidiaries were studied from 1995 to 2002. Data were collected from a postal survey, field and telephone interviews, and secondary sources. Subsidiary self‐determination and teamwork were found to have a significant effect on knowledge output, as objectively measured by patent citations. Subsidiary self‐determination on inputs such as sourcing and hiring, and self‐determination on outputs such as marketing and product development, emerged as positive determinants of knowledge generation in R&D subsidiaries. In addition, interteam cooperation and intrateam cooperation were significant determinants of knowledge generation by subsidiaries. These findings highlight the importance of self‐determination, teamwork, and cooperation to knowledge creation and innovations. Managers face the tough challenge of how to motivate globally dispersed knowledge workers to conduct research that will generate knowledge and will strengthen firm performance. The results provide theoretical and practical insights on how MNCs can leverage their innovation competencies across foreign R&D subsidiaries.     

Diversification strategy and internationalization: Implications for mne performance

This study examines potential explanations for performance differences among multinational enterprises (MNEs). The research variables, diversification strategy and degree of internationalization, involve basic elements of firms' strategy: range and relatedness of products, and relative emphasis on foreign versus domestic operations. The sample included the 100 largest MNEs from the U.S. and Europe. Diversification strategy was significantly related to MNE performance, extending Rumelt's seminal research to international business. Degree of internationalization was also significantly related to MNE performance.     

What factors determine the subsidiary mode of overseas R&D by developing-country MNEs? Empirical evidence from Chinese subsidiaries abroad

This study examines the determinants of the subsidiary modes of overseas research and development (R&D) by Chinese multinational enterprises (MNEs). Based on resource-based view and absorptive capabilities, we propose that financial resources and technological resources have different effects on the selection of overseas R&D subsidiary modes, which are competence-exploiting mode or competence-creating mode. This is supported by the empirical results in this paper using data from a survey of 40 Chinese overseas R&D subsidiaries. The results demonstrate that the parent firms with richer financial resources and more R&D expenses prefer the competence-exploiting mode, while the parent firms with more R&D personnel favor the competence-creating mode. Additionally, this study finds that firms matching our mode choice model tend to enjoy a higher level of innovative performance.     

Home-country government support,the belt and road initiative,and the foreign performance of Chinese state-owned subsidiaries

State-owned (SO) multinational enterprises (MNEs) from emerging economies face two contradictory effects on their foreign operations due to their linkage with their home-country governments. Although home governments provide SO MNEs with resources, the affiliation also exposes SO MNEs to the legitimacy challenges in the host countries. Given this theoretical debate, we propose that home government support may facilitate SO MNEs’ post-entry operations in the host markets. Furthermore, because the legitimacy pressures directed at SO MNEs may be contingent on the interstate relations between the host and home governments facilitated by China’s Belt and Road Initiative (BRI), the BRI cooperative relations may shift the effect of home government support. Using survey and archival data, we find that home government support has a positive impact on the foreign performance of SO subsidiaries. This effect is weaker in countries that are cooperating with the BRI than in those that are not. Moreover, institutional distance weakens the negative interactive effect between BRI cooperation and home government support on the performance of SO MNEs’ foreign subsidiaries. These findings extend the institutional perspective by highlighting an alternative source of legitimacy for MNEs with distinctive attributes and in various host conditions.

     

Determinants of increasing R&D complexity in affiliates of manufacturing multinational corporations in the UK

The aim of this paper is to evaluate the technological trajectories of the UK subsidiaries of manufacturing multinational corporations as measured by changes in their R&D complexity over a five year period. The data was gathered from a postal survey of 500 randomly selected subsidiaries in the UK; of the respondents that had been established in Britain for at least five years, 16 were found to demonstrate decreasing and 48 increasing complexity of R&D activities. These 64 firms were compared across a number of strategic variables, and a powerful logistic regression model developed that predicts technological trajectories with great precision.
The key variables in the model were differences (over five years) in sales volume, decision making autonomy about human resource matters in the subsidiary, sensitivity to the needs of sister subsidiaries when developing new products, heterogeneity of the subsidiary's markets, and the degree of localization of certain control functions. The central lesson for the subsidiary R&D manager is that HQ undertakings about R&D strategy as it concerns the subsidiary may be fairly accurately evaluated via the model and its five strategic variables.     

The importance of internal and external R&D network linkages for R&D organisations: evidence from Singapore

This paper examines the importance of internal and external R&D networks for R&D organisations of multinational firms (MNCs) in Singapore and investigates corresponding R&D management requirements in this context, namely a late-industrialising country in Asia. A unique feature of Singapore is its ability to attract 'high quality' foreign direct investment, involving activities of higher value added and more complex technology without having developed full-fledged R&D activities among its business organisations, thus creating a challenging situation for subsidiary R&D managers, both in the internal R&D organisation as well as in the external research environment. This paper analyses these issues.
Based on in-depth interviews with 53 R&D subsidiaries of MNCs operating in Singapore, this paper identifies internal and external R&D management needs. Through our analysis of data gleaned from these interviews, we found that subsidiary R&D managers need to increase and/or maintain the strategic importance of their R&D site internally within their global corporate R&D organisation. This requires constant upgrading of the technological level at the R&D subsidiary and intense communication with headquarters as well as other R&D subsidiaries. Furthermore, our findings indicate that in the external research environment, subsidiary R&D managers need to create an efficient local network of external players. If these internal and external issues are properly addressed, the R&D subsidiary can effectively contribute to the corporate R&D organisation and be a critical partner in the local research network. Lessons learned from the Singapore experience include the need to develop sufficient local expertise as well as to change the mindset of managers to focus on creativity rather than precise execution.     

Expatriation and its effect on headquarters' attention in the multinational enterprise

We explore the circumstances under which expatriates can help their host‐subsidiary capture headquarters' attention. Our central contention is that expatriates will be particularly helpful in situations where a subsidiary or its market is showing signs of growth, allowing headquarters to recognize information signaling opportunities for the firm that could otherwise go unnoticed. We test this contention using a robust instrumental variable approach in a single multinational enterprise. Our results show that subsidiaries hosting expatriates and experiencing growth at the subsidiary or market level have a higher probability of capturing headquarters' attention. Copyright © 2013 John Wiley & Sons, Ltd.     

MNEs and corruption: the impact of national institutions and subsidiary strategy

We argue that the pressure MNE subsidiaries face to engage in corrupt practices in their host country varies positively with the institutionalization of corrupt practices in both host and home country environments. We further argue that the relationship between an MNE's home country environment and the pressure it faces in the host country is moderated by its localization strategy. Results suggest a positive relationship between the host country corruption environment and the pressure subsidiaries face to engage in bribery locally. Mixed results emerged concerning MNEs from home countries participating in the OECD Convention for Combating Bribery. Results concerning the impact of the home country corruption environment are best viewed in light of significant moderating effects. When MNEs did not have local partners, firms from less corrupt home countries reported less pressure to engage in corrupt practices locally; however, the presence of local partners eliminated this relationship. Results will help managers understand the pressures their firm is likely to face when operating in corrupt host country environments, and also offer guidance concerning how the firm might reduce its exposure to those local institutional pressures. Copyright © 2010 John Wiley & Sons, Ltd.     

Multinationals' response to major disasters: how does subsidiary investment vary in response to the type of disaster and the quality of country governance?

We investigate the response of multinational corporations (MNCs) to major disasters at the subsidiary level. We examine the type and severity of the disaster and whether and how country governance moderates the relationship between exogenous disaster risk and subsidiary investment. We test our hypotheses with a panel dataset of 71 large European MNCs and their subsidiaries (2001–2006) with 31,285 total observations. Findings suggest that the number of a firm's foreign subsidiaries is likely to decrease in response to terrorist attacks or technological disasters but not natural disasters, regardless of the severity of the event. For terrorist activities, MNC subsidiary‐level disinvestment is less likely when the quality of host country governance is higher. Copyright © 2011 John Wiley & Sons, Ltd.